Europe’s defense spending has never been higher in the post-Cold War era. That sentence would have seemed implausible five years ago, when the continent’s military budgets were a persistent source of friction with Washington and a running joke among defense analysts who watched the same alliance members spend decades below the 2% of GDP threshold they had formally committed to meeting. The joke is no longer funny, and the spending is no longer theoretical.
In 2025, European NATO members recorded the fastest annual increase in defense spending since 1953, according to data published by the Stockholm International Peace Research Institute. Defense spending across the 29 European NATO members reached a combined $559 billion, with 22 of them meeting the 2% of GDP threshold for the first time. Germany crossed that line for the first time since 1990. Spain’s military budget surged 50%. Poland is now spending 4.5% of its GDP on defense, the highest burden among all NATO members.
The numbers are extraordinary. The problem, according to military planners and defense economists who study European security closely, is that they may still not be enough.
The Scale of What Has Changed
To understand how dramatically the European defense picture has shifted, it helps to start where the shift began.
Russia’s full-scale invasion of Ukraine in February 2022 ended what had been nearly three decades of European assumptions about the nature of security on the continent. The assumption that a major conventional war in Europe was effectively impossible, that economic interdependence, diplomatic institutions, and the shadow of nuclear deterrence had rendered it obsolete, collapsed within hours of the first Russian missiles striking Ukrainian cities. What followed was a rapid, accelerating, and in some countries genuinely historic reassessment of what European defense required.
European defense spending had been rising from €218 billion in 2021 to an expected €381 billion in 2025, a 62% increase in four years, driven by a combination of political will, public pressure, and the visible inadequacy of existing military capabilities. The pace accelerated further after the June 2025 NATO Summit in The Hague, where alliance members agreed to a new benchmark of at least 3.5% of GDP for core defense spending, a figure that would lift European defense spending toward €800 billion by the end of the decade. The Atlantic Council’s NATO defense spending tracker documents that in 2025 alone, European allies and Canada increased defense spending by 20% from the previous year, with all allies now exceeding the previous 2% target for the first time in recorded NATO history.
The most striking individual-country story is Germany. Berlin spent decades as the symbolic embodiment of European military restraint, a country whose history made large defense budgets politically sensitive and whose economic model depended on Russian gas. Both of those constraints collapsed simultaneously in 2022 and 2023. Germany’s defense spending grew 24% year-on-year to $114 billion in 2025, and Berlin has pledged to reach 3.5% of GDP or €162 billion by 2029. That would make Germany one of the largest military spenders in the world by absolute terms, exceeding the defense budgets of most countries on earth.
Why the Numbers May Still Fall Short
The case that European defense spending is still insufficient begins with a simple observation: money is a necessary condition for military capability, but it is not sufficient. What Europe is buying, how quickly it can deploy what it buys, and how effectively its national militaries can operate together are questions that budgets alone cannot answer.
The capability gap is real and documented. Despite the dramatic increase in spending, total equipment stocks in European NATO countries remain below their 2021 levels, reflecting military donations to Ukraine, the retirement of legacy systems, and long delivery timelines for new equipment. Europe donated significant quantities of its existing artillery, ammunition, armored vehicles, and air defense systems to Ukraine between 2022 and 2025. Replacing those donations takes years, not months. Defense industry production capacity, which had been optimized for peacetime efficiency rather than wartime output, cannot immediately scale to meet the new demand. European defense tech funding rose from around €200 million in 2021 to €2.6 billion in 2025, a significant growth, but US defense tech investment remains close to three times higher than in European NATO countries.
The interoperability problem compounds the equipment gap. European NATO comprises 29 national militaries, each with its own command structures, equipment specifications, communication systems, and procurement processes. The ability to operate effectively together in a high-intensity conflict depends on years of integration, standardization, and joint exercises that budgets can fund but cannot instantly create. The sharpest analysis of this problem comes from comparing what the money is theoretically buying with what it can realistically deliver. An alliance that doubles its defense budgets over four years but lacks the industrial production, the trained personnel, and the command integration to translate those budgets into combat-ready forces has improved its trajectory without yet closing its capability deficit.
The manpower challenge is one dimension of this that receives insufficient attention. The demographic pressures affecting European populations, particularly the decline of working-age populations in many countries, mean that increasing military headcount at the pace that security assessments recommend is genuinely difficult. Recruiting, training, and retaining skilled military personnel in competitive labor markets is a structural challenge that workforce demographic shifts are making systematically harder across the developed world.
The American Withdrawal Question
Underlying every discussion of European defense adequacy is a question that was largely theoretical for most of the post-Cold War period and is now emphatically not: how much of the US security guarantee can Europe rely on?
Donald Trump’s return to the presidency in January 2025 brought with it a posture toward NATO that is fundamentally transactional in a way that previous administrations, including Trump’s first term, had not been in practice. The administration has indicated that it expects European allies to take primary responsibility for their own conventional defense. It has signaled, in various contexts, that US treaty commitments may not be automatic if European allies have not met spending targets. It has reduced US troop levels in Europe and has explicitly described America’s European security role as something that can be renegotiated.
The fiscal arithmetic of this shift is significant. The United States spent $954 billion on defense in 2025, even after a 7.5% decline from the previous year. Its defense technology investment, its nuclear arsenal, its intelligence capabilities, and its power projection capacity represent contributions to European security that cannot be replaced by European spending alone on any near-term timeline. An analysis by The Economist found that while US treaty allies’ combined defense spending exceeded $1 trillion in 2025 on a purchasing-power-adjusted basis, European NATO members alone still came in at 81% of the US military budget, a significant gap when the question is whether Europe could sustain its own defense without US backing in a major conventional conflict.
This is not a hypothetical concern. European defense planners are actively modelling scenarios in which US support is limited, delayed, or conditional. The infrastructure being built to support those scenarios, the new command structures, the pre-positioned equipment, the logistics networks, the emergency industrial production agreements, is the practical consequence of a security guarantee that can no longer be taken as automatic. The same dynamic driving investment in strategic infrastructure to reduce dependency on any single external guarantor applies equally to defense, where the race to build sovereign strategic capability is reshaping procurement decisions across the continent.
The Industrial Base Problem
Perhaps the most underappreciated dimension of the European defense spending surge is the question of what European industry can actually produce and on what timeline.
European defense companies have substantially outperformed broader equity indices since 2022. An equally weighted index of large European defense companies delivered a total shareholder return of 401% since 2022, an extraordinary performance that reflects genuine market confidence in a sustained spending environment. Venture capital investment in European defense technology accelerated sharply in 2025, with deal volumes rising by a factor of two to three year on year.
But share prices and venture funding reflect expectations about future production, not current capacity. The European defense industry generated a turnover of €183.4 billion in 2024, a 13.8% increase from the previous year. Defense equipment procurement increased by 39% compared to 2023, with procurement expenditure reaching €88 billion in 2024. Those numbers sound significant until they are compared with the scale of what is actually needed. A March 2026 analysis found that even at accelerated production rates, many of the most critical systems, long-range artillery ammunition, air defense interceptors, and armored vehicles face delivery timelines measured in years.
The fragmentation of the European defense industrial base compounds the capacity problem. Unlike the United States, which has a single large defense market, Europe has 27 EU member state defense industries plus the UK, each with national champions, national procurement preferences, and national political constraints on cooperation. The EU’s European Defence Industry Programme, which provides €1.5 billion in grants between 2025 and 2027 to boost European defence industry cooperation, is a step toward addressing this fragmentation, but €1.5 billion against an annual procurement challenge measured in the hundreds of billions is a modest intervention. Building the integrated industrial capacity that European defense actually requires will take years and significant political commitment that has not yet been fully delivered.
The European Parliament Think Tank’s detailed analysis of EU member state defence budgets provides country-level granularity on where spending is going and where significant gaps remain in both capacity and capability.
What the Numbers Are Being Spent On
The composition of European defense spending matters as much as its scale.
The most encouraging trend in the data is the shift toward investment in the procurement of new equipment, the funding of research and development, and the building of genuinely new military capabilities rather than merely sustaining existing ones. In 2024, EU member states allocated 31% of total defense expenditure to investment, the highest share ever recorded. Defense equipment procurement increased 39% from 2023 to 2024, exceeding €100 billion for the first time and reaching a record €106 billion.
The specific systems being prioritized reveal the threat assessments driving them. Air defense is the most urgent priority across virtually all European militaries, reflecting the lesson from Ukraine that modern high-intensity warfare involves sustained missile and drone attack at a scale that existing European air defense capacity cannot absorb. Long-range precision strike capabilities are a close second, reflecting the need to hold Russian targets at risk at distances beyond artillery range. Command, control, and intelligence integration, the ability to see, share, and act on information across national military boundaries, is the third pillar of the modernization effort.
Germany’s purchase of Israel’s exoatmospheric hypersonic anti-ballistic missile defense system is one concrete example. Poland’s acquisition of main battle tanks and self-propelled howitzers from South Korea is another. The pattern across the continent is similar: countries that spent decades deferring procurement decisions are now executing them, often from non-traditional suppliers, at a pace that European defense industries have been slow to match.
The fiscal cost of all of this is significant at a moment when many European governments are simultaneously managing high levels of public debt, inflationary pressures, and public services that have their own funding needs. The countries increasing defense spending most sharply are, in many cases, making explicit trade-offs against other priorities. Those trade-offs are the subject of genuine political debate in virtually every European capital, and they place a ceiling on how far and how fast the rearmament can go, regardless of what military assessments say is required. The fiscal pressure of simultaneously funding defense expansion and servicing legacy debt burdens echoes the broader challenge that fiscal policy faces when governments must simultaneously invest in strategic capacity and manage the consequences of years of underinvestment.
Looking Ahead
The trajectory of European defense spending is now clearly established. The June 2026 NATO Summit in Ankara will provide the next formal milestone, with European allies expected to demonstrate progress toward the 3.5% GDP benchmark agreed at The Hague.
The SIPRI press release on global military spending in 2025 notes that “given the range of current crises, as well as many states’ long-term military spending targets, this growth will probably continue through 2026 and beyond.” That assessment appears accurate. The political conditions that drove the rearmament have not changed. Russia remains at war in Ukraine. The US commitment to European defense remains uncertain. The strategic environment that made decades of European underinvestment possible no longer exists.
What is less clear is whether the pace of spending growth can be sustained long enough, and the capability gaps closed quickly enough, to produce the actual security outcomes that are the point of the exercise. Military analysts who war-game European defense scenarios without US backing reach conclusions that are sobering, regardless of where spending numbers are headed. The money is arriving. The factories are ramping up. The political will, for the first time in a generation, appears genuine. Whether all of that translates into a Europe that can defend itself in a meaningful timeframe is a question that the next three to five years will begin to answer.
Europe is finally spending what it should have spent years ago. The question is whether it started soon enough.
